HH: A program in which I continue my series of conversations with Dr. Thomas P.M. Barnett. Dr. Barnett is the author of the brand new book, Great Powers: America And The World After Bush. His previous bestseller, The Pentagon’s New Map reshaped a lot of strategic thinking in the United States. Great Powers attempts to do the same thing about the world in which we are living after President Bush and the dawn of the era of Obama. Dr. Barnett, welcome back to the program. This week, we’re doing Chapter 7. It’s our sixth conversation. I want to start off with a quote from Page 342.

TPMB: All right.

HH: “We can’t win this struggle with guns. We can’t win it by ourselves or with a small fraction of humanity we call the West. We can’t win it with a focus on just terrorism and democracy. We can’t secure this most fantastic victory, a truly global, liberal trade order, by demanding states leap frog from their sheltered, disconnected past and into an immediate present that matches our level of globalization and connectivity, our level of free markets, and our level of political pluralism all at once.” The key phrase there is that you’re identifying as the goal of American grand strategy then a global, liberal trade order. Why is that the overarching goal?

TPMB: Well, back to the history discussion we had several weeks back. You know, it was first the diagnosis of Theodore Roosevelt that America couldn’t be America unless it tried to spread on a global basis the same rules that animated our interactions here within the United States. So it’s very Marxian in a sense. Karl Marx said humanity has this natural ambition to kind of remake the planet in their image. And I think we’ve just been the most successful species in that regard in a global political system. I mean, the Europeans had their efforts and their attempts and their empires and their version of globalization, but that one self destructed, very much according to Lenin’s diagnosis, whereas ours has proven to be far more expansive, far more enriching and empowering, and I would argue over time, far more attractive. People really like the possibilities of reinvention and freedom and individual ambition unleashed.

HH: How much pushback do you get when you are explicit, and I, by the way, agree that this is an important, defining characteristic of what we’re about – a liberal, international trade order. But how much pushback do you get from, I don’t want to call them nativists, but from protectionists and from isolationism, which is a very American tradition as is liberal expansionism?

TPMB: Well, or the one they really tag you with is exceptionalism. They say…and that swings both ways, that argument. They say America is exceptional, and if you go too far down that path, then you’re kind of into Sam Huntington territory. We’re exceptional only on the basis of the Anglo-Saxon connection, and certain cultural influences. But my argument would be yes, we had certain birthrights and certain lessons and influences that we took, most notably from the British, definitely in terms of glorious revolution, most definitely in terms of the Dutch, who kind of pioneered this free market for ideas, free market for commerce, free market for religious competition. But we’ve been able to blend in, you know, I make this phrase, we blend the best and we discard the rest in kind of a brutal remix. That is the definition of our synthetic culture. And as much as people are attracted to that, they’re at once repelled by it to a certain extent, because they look at it and they say well, that’s the weird, exceptional freedom that America has foisted upon itself. It’s not what’s going to happen to my Ireland or my France or my Germany or whatever. But in reality, all those countries are experiencing the same kind of pressures, the same kind of inflows of immigrants and what not, forcing themselves to redefine their definition of who can be a Frenchman. Well, theoretically, only the French can be a Frenchman. But that’s where our synthetic culture, our exceptionalism really is a gift that keeps on giving. Anybody can be an American, and being an American can incorporate virtually, does, any cultural influence from around the world. So as much as they fear sort of our influence, I mean, it’s really our example and our willingness to defend our example, and our willingness to spread our example, because we do think we’re exceptional. But to say that doesn’t mean that the future of globalization is a future that looks like America, necessarily, because America itself is under constant reinvention. And as we take in more Latinos, we take in more Asians, we are constantly changing the mix. I think we’re probably closer to a future global culture than anybody else out there, but I don’t have a hazard a prediction that says it’s going to be based on us and us alone. So the exceptionalism, I say, is always one of not that we’re the only ones who can do this, not that we’re the only ones who can make this happen, but that as an experiment of connectivity, and I always say don’t bet against humanity’s desire to connect with others in all forms, I mean, we’re just tremendously social creatures. We’re the furthest along in this experiment, and that’s all I invest in my exceptionalism here as an American. We’re the furthest along in this experiment. And so that begets certain responsibilities for us, especially during crises like now.

HH: Now I’ve got to ask you, Dr. Barnett, this is the chapter about the sys-admin industrial complex that is needed to perpetrate and defend, or at least make resilient this international, global, liberal trade order. But as I read through it, especially the history part of this chapter where you say the two most important developments that allowed this burgeoning to occur, Deng Xiaoping’s embrace of managed capitalism…

TPMB: Right.

HH: …authoritarian capitalism, and the Thatcher-Reagan deregulation of international financial markets. And you talk about the radical increase in velocity, volume, variety and visibility of market transaction.

TPMB: Right.

HH: Aren’t we living through the consequences of the truism that speed kills, that we’ve gotten so fast that these capital flows turned on us in October of last year and just trashed the system?

TPMB: Well, you know, I wouldn’t, I would say after a 27 year boom triggered in 1982, you know, so all those who predicted doom, doom, doom were wrong for 27 years. And then like a broken clock, they were right ever 27th year when we finally a cropper in 2009, in any long boom like that you attract bad habits over time. I mean, we had almost a generation and a half of people who haven’t lived through hard times, okay? And they get experimental. They start thinking the rules don’t apply. That happens on a regular rhythm on Wall Street. What happened this time, though, my argument is, and I got this, I spoke recently at a big convention of investors in Phoenix, and the rationale I got from them was uniform. They don’t look at this as a business crisis. They really look at this more as a structural crisis, meaning we went as far as we could in that Bretton Woods II kind of implicit agreement we had with Asia – we’ll keep enabling your export-driven growth as long as you take your trade surpluses and plow it back into our debt markets, allow us to play security leviathan there. I mean, that went as well and as long as it could. They couldn’t save any more, they couldn’t export any more. We couldn’t import any more, and we couldn’t go into debt any more. So that restructuring of that major relationship, which was highly beneficial, highly beneficial…I mean, we had a wonderful, long run here. We paid for it in terms of a certain amount of over-leverage, not uncommon in U.S. history, we’ve done it in the past. We had a big crisis like this in 1906, ’07, ’08, that time frame. So we’ve done this before, and then we have a new austerity and we have a new commitment to saving and stuff like that. And social…we’re great at paradigm shifts, this culture. And you just can’t shock us to death. You get a big enough crisis, we’ll change our behavior almost on a dime, which is one of our great strengths. But there is going to have to be this big, structural adjustment. In that process, though, there was all sorts of new risk management tools that were promulgated by Wall Street, which I think is good on average. They do good things, they help us figure out how to manage risk in a more systematic fashion. But this time, the double whammy that hit us was not only that big transaction strategy we had going with Asia comes a cropper, it just hits a maximum wall, but we had a very high trust environment experimenting with very sophisticated risk management tools, and then selling those things to lesser trust environments, less sophisticated markets. And other people in the world who bought into all those schemes, the sub-prime and all the collateralized debt obligations, they just didn’t know what they were buying. I mean, we kind of, the system kind of pulled the wool over the eyes of a lot of investors who weren’t sophisticated and experienced enough to know the danger they were getting into.

HH: Do you think the velocity that marks this chapter, as you chart what’s happened over the last quarter century, might also mark a repair of the damage that given the technologies now at our command, and the information flows that now occur on a routine basis with the computerization of the world…

TPMB: Right.

HH: …that the repair of the damage can be quick?

TPMB: Right. I mean, you’re an optimist like I am. I agree. I mean, I think that’s an underlying point of the Black Swan book of Nicholas Taleb. If we are in a more recursive environment, you know, I mean the reason why a cut on your tongue heals very fast, your tongue has a very recursive environment. There’s a lot of blood there, so it can mange that solution very, very quickly, or like a young child. Like I had a kid who got cancer when she was two – that kid can regenerate really fast.

HH: Yup.

TPMB: So you can do a lot of tough things to that kid in terms of the cure. A more recursive, networked, global environment has more workarounds, has more healing capacity, more regenerative capacity. So we got this news just this week from the IMF which until recently was predicting a 2% drop in global trade. And what you saw in the early 30s was like 3-5% drop a year several years in a row. Now, they’re saying this year’s going to be about 9%. And you know, when you look at that number, you’re like oh, my God, in terms of the velocity and all the arguments we’re making here. That is a stunner. I bet you we can recover a lot faster than we realize, though.

HH: We’ll be right back with Dr. Thomas P.M. Barnett.

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HH: This is the chapter about interconnectedness, resilience, and threats to that resilience and interconnectedness. Dr. Barnett, first let’s talk about the global food chain, because it was fascinating how you sort of predict the international market for Wisconsin milk based upon three billion new Chinese who want to increase their caloric intake. But there’s also rising vulnerability as we interconnect all this, and you don’t slide over that, but we do have these revaunchists out there, these recidivists in centuries terms, that such interconnectedness presents to them targets of great opportunity.

TPMB: Sure. You know, we’ve talked historically about this, NBC, nuclear, biological, chemical weapons of mass destruction. And the order of that is really wrong. It’s really CNB in terms of history. You think of the 19th Century as the century of chemistry, so lo and behold you have chemical weapons, World War I. Okay, 20th Century, century of physics. Lo and behold, you have nuclear weapons at the end of World War II. 21st Century, definitely going to be a biologically focused century. So if you’re thinking about terrorism, and this is one of the reasons why I don’t like us to obsess so much on nukes, I’m much more interested in biological, I think that’s where the real dangers start to appear. And if you think about this in terms of a global scale, there are four chunks of the world that are really net exporters of food stuffs in the form of grain, which is basic stuff we all kind of survive on, rice and corn and all that kind of stuff. There’s Russia, Ukraine, Belarus, Kazakhstan, that’s one. There’s Australia-New Zealand, that’s another, having a bit of a drought right now. There’s the ABC countries, Argentina, Brazil, Chile, and then there’s the OPEC of grain, North America. Okay, the amount of grain that actually moves in a net fashion around the planet, it’s about a hundred and fifty million metric tons. We supply about 70% of it.

HH: Wow.

TPMB: Okay, that is powerful stuff. I mean, we supplied 70% of cotton in 1850. We were dominant in that time frame. OPEC controls, you know, on that kind of order, not in terms of production, but obviously in terms of reserves. So I like to say if OPEC has us over an oil barrel, we’ve got them over a bread basket, because if you look at the Middle East, massive food importers. Now you overlay climate change on that, and what you find is it gets easier, or okay in terms of the future, growing the farther away you get from the Equator. So the places I named as those four sources are all fairly far from the Equator, meaning we’re going to be able to grow food where we can grow food now, but the places along the Equator where we can’t grow food, where 80% of the population growth’s going to happen in the next 30-40 years, that’s going to get a lot hotter, okay, and a lot drier, much more droughts. So you talk about food historically, very much where it’s grown and it’s harvested, co-located. I grow food in my back yard and I eat it, okay? History is going to be, in the future the argument’s going to be that food is going to be one of the most longest traveling resources in the system because of that map I just laid out for you. A lot of people aren’t going to have food where the population growth is highest and where the global warming impact is greatest. And the people who have lesser populations are going to be the ones who can grow more food. So much like energy today, we harvest it in one part of the world, consume it largely in another part, making energy networks seemingly the most important, vulnerable networks. We fight wars over these things. Okay, that’s all going to be replaced when you locally generate energy a lot more in the future. And you’re going to see food, which has historically been harvested and consumed in the same place now travels about 1,500 miles on average to your dinner table. That’s going to double and triple, I would argue in length, and the small percentages of dairy and grains that are traded now, 7-10% across borders, you’re going to see those percentages double and triple. And that’s going to mean food is the most vulnerable, important, decisive global network there is, and that co-locates that phenomenon with this biological threat in a biological century, telling me that that’s the thing I really want to worry about. That’s where I want to get my sensors and my transparency and my resilience built into the system.

HH: Now you also argue here that deterrence doesn’t make sense when in fact, or retaliation doesn’t make sense when in fact it breaks the very networks that you’re trying to build, establish, protect, defend and extend. But if that’s the case, if deterrence…if retaliation doesn’t make sense, how do you deter?

TPMB: Well, we take deterrence from the nuclear realm, okay? And the realm there is very much a huge retaliation, an absurdly over-proportional retaliation that says to the other side, don’t even think about this, because if you do, we’re all going to die and you’re not going to get anything. And you really can’t do that with networks. You can’t kind of cut people off from networks, especially because the networks tend to be so pervasive and so invasive in these situations, that most of the friction we meet, most of the resistance we meet, I argue, is a demand for identity retention. People want to feel like they can retain their identity, despite being absorbed by this Borg-like phenomenon, this network where you will be assimilated and homogenized, in their mind, that American cultural remix kind of phenomenon. So I say what you’ve got to do is understand that that is a demand function, okay? The terrorists are not a supply you can reduce, anymore than you can reduce the drug problem in America by going after supply. You have to reduce demand, or in this case, you have to meet people’s demand to feel like they’re going to be able to retain their identity. So there’s some compromises you have to make with this networking function. You’re going to have to allow for a certain amount of content control. I always say everybody wants the connectivity. I want my satellite television, okay, but I don’t want Skinemax at my house, because I’ve got a 17 year old girl and a 14 year old son. So I have parental control on that one. I simply don’t buy that HBO-Cinemax package. A similar parallel to a lot of countries around the world. They want the connectivity, but China wants to have certain controls over the internet, dangerous ideas as far as they’re concerned. Nepal recently brought in satellite television, the first thing they wanted jacked out of it was MTV…

HH: Yup.

TPMB: …because they said too much sexual content. So I think you’re going to make these deals time and time again. I make the argument with the Chinese, you know, they say the great firewall of China and all that stuff, and these people are living a walled garden experience. They don’t even know that they’re living inside the Matrix on the internet, because the Chinese have blocked it off really well. I say you know, first generation, they all love the Matrix in the first generation. That’s why AOL.com was so darned popular in America. You had a lot of people going into this wild, wild internet, and if you gave them this walled garden, they said great, you know, I’m happy with the connectivity, I want a sheltered existence. So for the first generation, that kind of walled garden experience, that kind of censorship approach works. The problem is their kids. Their kids, as soon as they start feeling the wall of that Matrix, they want to hack their way through it, they want to take the red pill and emerge on the other side, Alice and Wonderland, and you are gone. And you can’t control that kind of connectivity. So when a connectivity phenomenon comes to China and we see them go from nothing to 300 million internet users, and then they make demands on Google and Yahoo and these various connecting companies and internet providers and search engines, I say let them make their compromises at first, because the connectivity will change behavior. Don’t worry about the first generation and what kind of taboos they want to place on the connectivity, their demand for content control. Trust that their kids are ultimately going to demand more freedom. You’ll see a real revolution there.

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HH: Dr. Barnett, on Pages 297-298, you give kind of a brief look at your professional life, and the life of Enterra, your corporation. And as I was reading through that, I thought to myself, you know, no wonder you’re an optimist. You’ve had all of these vastly important inputs, these very expensive technical add-ons, the Harvard PhD is sort of the equivalent of vast oil deposits, the Pentagon credentialing, with the New York Times bestseller, makes you completely credible and trustworthy in the world. But you represent something as a result, sort of apogee man, that the rest of the gap, and not even the gap but the near gap countries can’t hope to replicate. And I know you talk a lot about people who stand in that gap and translate, provide the expertise, but I don’t know if there are enough of those, or if they will be trusted by the gap countries, because you arrive, and people like you arrive as their middlemen, and I don’t even know how they translate you. It’s like the Borg. You must be threatening to them.

TPMB Well, I tell you, I do a lot of speaking in kind of developing countries and emerging markets. I’m going to Turkey soon, I go to China on a regular basis. And I find my kind of message, again, for the older generation, tends to be kind of flabbergasting. I mean, they really find it kind of frightening. It’s just a little too much, too fast. They’re just getting used to this package. And like anybody as they age, there’s only so many new technological things. My mom’s 84, and she’s like, ‘I don’t do attachments. I draw the line at attachments.’ And she’s 84, and she’s made that decision. But you start talking to the young people, and that’s my favorite thing in these countries, is to go talk to graduate students and lecture at universities. Man, their ability to adapt themselves to this kind fo opportunity is stunning.

HH: Aren’t they worried that the Steve DeAngelis and Admiral Ulrich and the rest of you doing development in a box, that you’re just Cecil Rhodes and King Leopold with better marketing?

TPMB: Well, the difference is you’ve got to be empowering to the local. I mean, what we call development in a box is I make the comparison to a general contractor in a subdivision, okay? You want to build a house in my subdivision, I’m going to give you the connectivity package. I’m going to give you the water and the sewer connection, I’m going to give you the electricity, I’m going to give you the cable, I’m going to give you the internet. I’m not going to negotiate that kind of stuff, because that’s already been decided in our subdivision called the global economy. So you tell people the connectivity package, you don’t negotiate, you mandate, you push that package to them, and you make that your aid, okay? And then you let them decide how they’re going to organize their house, so to speak, their family, how they’re going to live their lives. So you never try to impose externally models that are very culturally-driven, okay? So I’m going to tell you the rough size of the windows in your house and how tall your stairs have got to be because we’ve decided in terms of building over centuries this is what makes a solid house, and these are the rules and regulations, the architectural code that makes sense. But you know, I shouldn’t be in the business of telling you how to get along with your wife, or how to raise your children, or what God to worship, and how, or how to cook food, or any of those kinds of things. You mandate the connectivity, you give people the opportunity, and then you let them make of it what they will. We find time and time again, the average person, even the uneducated, the illiterate stuns us with their ability. Cell phones are selling like crazy in rural India. People will buy, and their farmers will buy them before they put a toilet in their house. That’s how much they value this connectivity. Why? All of a sudden, they’re not waiting eight hours on a truck on a dusty road to come buy their wares. I mean, they call when they want them, and they go there. The time savings, the ability to stay connected to their family while they’re out in the fields, the ability to check market prices, this kind of stuff, we constantly underestimate what people will do with it. Kenya has gone so wild with cell phones that people use cell phone minutes as a currency. And you and I would have spent the rest of our lives never figuring that one out.

HH: Right.

TPMB: …because it never would have occurred to us.

HH: Now in terms of the key question at the end of this chapter is the Asian substitutes are competing with, well, with the Enterra substitutes. And you know, we’ve got all these young military guys who are back now going off and doing this. We’ve got less than a minute to the break. Are the Asians going to be better at this than us because they are less demanding on the culture side?

TPMB: Well, they’re less demanding on the political side, but they tend not to have the same good rules that we have. I mean, the standards and the stringency and the transparency that’s demanded by our system in part because we’re litigious, because we sue people if they don’t keep their contracts and what not, makes our rules much more robust. So dealing with us gives you global standards. Dealing with the Chinese, I mean, you can certainly tap into demand for your resources, but you really want to always have the West in there in many ways, because we bring the good rules, and that’s what makes the gift that keeps on giving, the connectivity, really start to flow.

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HH: As you can tell, I’m very enthusiastic about this book, even though we disagree on some key points. On this chapter, though, not much. In fact, in this chapter, about the build-out of the sys-admin operating system for the global, liberal trade order, I found a couple of things I want to bring to the attention to the audience, Dr. Barnett. You quote the Bush administration millennium strategy, “The private sector is our exit strategy from conflict.” And you write, “Victory means getting off the front page of the New York Times and onto the business/advertising section of the Wall Street Journal.”

TPMB: Right.

HH: And you use Macedonia as an example. Give a quick summary of that.

TPMB: Well, Macedonia was one of those parts of Yugoslavia that broke off with little violence. It kind of slipped away in the middle of all the tumult and the interventions from the outside world and the big fight over Bosnia-Herzegovina. What’s interesting is, you know, eight, ten years ago, nobody would have gone to Macedonia. But I started noticing these ads about a year and a half, two years ago, they were in Business Week, they’re in The Economist, they’re in the Wall Street Journal. It’s this wonderful ad that says invest in Macedonia, business Heaven. And you know, it’s one of those kind of weird uses of English by a foreign culture, and you’re kind of like, what is a business Heaven? And you realize, this was a small country that wired itself for like wi-fi, okay, on a simple USAID official developmental aid program, and then just started attracting attention from the outside world by offering like free trade zones, free enterprise zones. We’ll give you a sewer hook-up, we won’t tax you for ten years, we’ll give you all sorts of breaks on this and that. Come here, you access Macedonia, you get to access the EU, you get to access all these 700 million consumers really quickly. And what really drew my attention to this ad was that they showed Macedonia, and then they had rings around it, like x miles and x miles and x miles. And being a military kind of thinker, I look at that and I thought my God, that’s the missile range. They’re showing how far their missiles reach. And I realized what they were advertising was this is how quickly, in terms of rail and interstate and air corridors, you can reach all these industry players, you can reach all these consumers. And I thought boy, I’ve got to get countries from the map that shows their missile ranges, that shows their connectivity to markets. That’s what I call victory.

HH: Now the alternative to it, as you spell out, is that you can go the Macedonian way, which is basically our way with their overlay, or the alternative is China’s updated version, I’m quoting you here, of Imperial Japan’s co-prosperity sphere. Now that took me aback, because that’s a very negative way of casting what China is about. It’s sort of what I think China is about, but you are much more an unabashed enthusiast for China’s way. Do you think they have the same dangers implicit that overtook the co-prosperity sphere?

TPMB: Well, they don’t have the ideological ambition. I mean, they certainly will abuse you in a business sense as much as the Westerners did before, okay? Capitalism makes kind of brutes of all of you. And if there’s unequal counterparty capacity, you and I want to do a deal, you’re very unsophisticated, I’m very sophisticated, I do nasty, cruel things to you because I have more power and I’m more sophisticated in doing these kinds of things. If we’re more equal in our counterparty capacity, I can’t pull the wool over your eyes. So we have China going in to some fairly unsophisticated situations where China’s bribing its way, using very shady, corrupt business practices, not unlike how people did things in the American West, say, in 1860, you know, money under the table and brute force and corporations coming in with their own security and that kind of stuff. It’s a nasty, rough form. If left untended in terms of a global community that comes in and forces China to do better, China could very well replicate a lot of the same mercantilist practices in Africa that the Europeans did, okay? The answer to that is the same kind of thing that got Toyota to start building Toyotas in America. You start saying to this place you can’t simply take our money and sell us goods. You’ve got to let us in on the production that gets devoted to our own markets. So the way that Toyota became a globally-integrated enterprise, it was forced by angry populations like in Indiana, where if you drove a Toyota ten years ago in Indiana, you’d get your car keyed by locals who hated it, because we built GM and we built Ford and stuff like that here, and foreign cars weren’t allowed. How did they solve that kind of response from your average Indianan citizen? They started putting Toyota factories here. So China will be forced down this pathway, I argue, by the Africans who are already catching onto the fact that they’re replicating what Europe did to them a hundred years ago. And the good news is China actually looks at Africa as kind of the next stage for its replication as China ages and moves up the production chain. They need to foist off lower end production to places where they want to conquer not just the markets, but tap the labor.

HH: Will China, though, become impatient in the way Imperial Japan did, unwilling to live by that rule set and taking what it wants at some point from where it needs to get it?

TPMB: I think that’s an overblown fear, and I’ll tell you why. My fear is more that China won’t do anything nearly close to what it needs to do to actually defend its interests. They’re totally free riding on the system. They have very great reticence to back up their economic interest with any sort of, what I would consider, appropriate military presence around the world, in part because they don’t want to trigger any sort of rivalry with the United States, but in part because they like the free ride. My problem with them is you guys are bringing globalization. This is what I tell them every time I go to Beijing. You’re bringing globalization, and after a while Africans are going to start killing your people. They’re going to start targeting your oil rigs in eastern Ethiopia like they did the rebels last year, killing a bunch of Chinese oil workers. And they’re going to start saying you’re the bad people that are bringing unfair globalization to us. And eventually, China’s going to be forced to go into some sort of expansion of its military presence around the world, or there’s going to be a tension built up with us, because they’re going to put us in the role of being on the hook for that, and resentment will build on that basis, which I think is unhealthy. I think they need to step up, they need to start participating more and more. I think there’s an overlap of interest between us. We have political and military interests, largely, for Africa. We don’t want to see radical Salafi jihadists penetrate from the north and start to radicalize that situation, which is a real danger, I would argue, not a great one, but a real one, something we want to outflank. And we know that we don’t have the economic interest that the Chinese do, because we don’t need that kind of raw material access that they do, given their level of development.